Challenging Bad Faith Life Insurance Claim Denials

Challenging Bad Faith Life Insurance Claim Denials

The loss of a loved one is a tragic event, often followed by the burden of having to close off the deceased’s affairs. Often, the loss is also accompanied by financial loss or additional pressures as a result of lost employment income or other types of payments that the deceased person used to make. This hardship can be reduced if the deceased person had good Life Insurance.

There are cases when a Life Insurance provider will not make payouts to a beneficiary. In this article, we will look at the most common reasons for denied life insurance claims, as well as what recourse you have to obtain those payments.

Common reasons for problems getting life insurance payment

There are many different types of Life Insurance and each has its own contractual clauses, so no single article could cover every possible point of denial. But almost all policies follow the rules below, and these can be used as guidance to determine why your life insurance claim might be denied.

Suicide during the contestable period

Most life insurance policies contain a clause that says payouts won’t be made should the insured person commit suicide within the first one or two years of taking out the policy.

This initial one-or-two-year period is called the “contestable period” where life insurance companies look for any reason to say that the application was fraudulent.


If the insured person died as a result of substance abuse, the life insurance claim will usually be denied. In clear-cut cases, there is little a beneficiary can do to obtain the payout, such as when the person died of a heroin overdose and this is confirmed by the medical examiner.

But one of the controversial issues of life insurance payouts is the use of alcohol. Some insurance companies will fraudulently try and deny a life insurance claim if the person had alcohol in their blood even when that did not contribute to the person’s death. Worsening matters, in about 50% of the states in the USA, life insurance companies are explicitly allowed to add an “Alcohol Exclusion” clause that explicitly denies payouts should the person die with alcohol in their system.

It’s important to refuse having such a clause in any life insurance policy that you or your loved ones take out, particularly when there is no history of alcohol abuse.

Murder by beneficiary

If the beneficiary of the policy is convicted of murdering the insured person, no payment will be issued by the life insurance company to the beneficiary.

Hazardous activities

Hazardous activities that insurance companies consider high-risk are not typically covered in a life insurance policy. These activities can include scuba diving, hang gliding, flying an airplane, horseback riding, parasailing, off-roading, BASE jumping, skydiving, etc.

Sometimes, certain professions also fall under this category, such as airplane pilots and underground miners.

As with all denials of payment, your best option is to contact a competent lawyer to discover if the denial was unreasonable or not.

Illegal activities

If the insured person died while committing a crime, the claim will likely be denied. This is simple in the case of, say, an armed robbery where the insured person was gunned down while actively committing a crime.

But the matter gets complicated if the person was unknowingly thrust into an illegal activity, such as trespassing on someone’s property to hide and avoid an active shooter. In the latter case, if the claim is denied, an attorney might be able to get the claim paid.

Acts of war

Death through acts of war is not usually covered.

Journalists who travel to war-torn countries might want to consider something other than life insurance to protect their loved ones in the event of their untimely death by an act of war.

This clause usually does not apply to soldiers, but rather to civilians.

Lying or misrepresentation on a life insurance application

Rule Number One of applying for life insurance is to be completely honest on the application. Insurance companies will use any slightest hint of misrepresentation to null the entire policy when it comes time for payment, even when they gladly took the policyholder’s money during that person’s lifetime.

Failure to make payments

There is usually a grace period of 30 days after a lapsed payment where the policyholder can still catch up on the arrears. But once this grace period has ended, the life insurance company might cancel the policy, leaving the person uninsured. This would be valid grounds for them denying a payout.

Death during the contestability period

Even when there is no valid reason to deny payments, if the insured person dies within the contestability period, insurance companies will often try and grasp at anything to deny paying out claims.

A good insurance lawyer is often able to get these claims paid for you when the denials are found to be spurious.

Misrepresentations by the Insured

The business model of an insurance company is to take in more money than it pays out. That means denying claims. Insurance providers will, therefore, often try to find any reason to deny a claim, no matter how specious.

If the denial is not black-and-white, it is best to contact an attorney to review the claim and establish if it might be possible to obtain payment. Sometimes, when insurance companies know that a determined lawyer is now on the case, the insurance company will settle or simply pay the claim to avoid the hassle of being dragged through court.

What to do if your life insurance claim is denied?

The first thing to do is obtain a written explanation as to why the claim was denied and then review this against the initial policy.

After that, you must formally reject the denial. You can contact your state’s attorney general, the department of insurance, or hire your own lawyer to assist you with this.

Do You have a Dispute with a Life Insurance Company?

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